A housebuilding boom would create 200,000 new jobs

The government is considering reforming planning law to make building, and in particular housebuilding, easier by forcing planning authorities to take account of the economic impact.

This has been attacked by some environmental campaigners. However, little has been said about the potential economic impact.

Cebr has a housing market model that takes account of the supply of housing as part of the balancing of supply and demand.

It has made an assessment of the potential economic impact of raising the annual supply of new houses from the 2010 level of 95,000 to 300,000 by 2015.

It estimates that this would reduce housing rents by 2015 by nearly 11%, with potentially larger effects later. This would increase the affordability of housing especially for young people. It estimates that the potential impact on the rents paid by people under the age of 35 would be to boost their standards of living by 4% by 2015 and by more thereafter.

Not only would increased housebuilding improve living standards, and hence boost spending power, but it would also have a direct impact on GDP as it did in helping drive the recovery from the depression in the 1930s.

The massive housebuilding boom in the 1930s helped drive the UK recovery during this period and partly explains why the UK fared relatively well compared with other developed nations during the Great Depression. In 1930 there were about 800,000 workers in the UK building industry, but by 1939 this number had risen to over a million. The number of new dwellings built each year averaged over 300,000 during this period – far higher than the average of just 184,000 between 2000 and 2010.

The Cebr model estimates that, if housebuilding were to increase gradually to 300,000 dwelling starts between 2012 and 2015, some 201,000 extra permanent jobs in the construction sector would be created, and the sector would provide an extra £75 billion contribution to GDP over the time period, compared with Cebr’s current, more modest forecast of new housing starts.

Cebr housing economist Shehan Mohamed says, “With fiscal and monetary policy measures exhausted, the Government should consider how scaling back regulation can help bolster growth. One such measure is an easing of planning laws, which would help create thousands of new jobs in the construction sector.”

UK economist Scott Corfe says, “The squeeze on living standards in the UK is likely to persist for some time, as earnings growth struggles to keep pace with the rising cost of living. The limited supply of housing – which is pushing up rental and house prices to ever higher levels – is one of the biggest contributors to this cost of living crisis”.